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2022 Burgundy Vintage Provides Boost Amid Market Downturn

The 2022 Burgundy vintage has emerged as a bright spot in a market grappling with a prolonged downturn, according to the latest Liv-ex Burgundy report.

This development follows a tumultuous year marked by pricing instability.

With generous yields and high-quality wines, prices have remained relatively flat as producers aim to attract buyers in a challenging economic climate, although some have cautiously increased prices.

A Respite for a Struggling Market

Justin Gibbs, co-founder and exchange director at Liv-ex, noted that the 2022 vintage has provided a much-needed respite for a retreating market. "The combination of excellent overall quality and decent yields has been welcomed by growers, merchants, and collectors alike. But the question of value remains unanswered," he said. "Secondary market prices are under pressure while relative value measures continue to be stretched. With a bumper 2023 crop in the offing, the retreat in prices looks set to continue."

Modest Price Adjustments and Market Dynamics

The report highlighted that while it is too early to make definitive judgments, the 2022 vintage has performed better than many anticipated. The decent yields have helped stabilize a market that was becoming dangerously thin, with good quality and producers largely keeping price hikes to a minimum. The report noted that around 10% of producers lowered their prices year-on-year, while about 40% raised their prices modestly, which made selling challenging in some areas. Despite this, allocations have mostly been restored, and merchants remain hopeful that the 2022 vintage will eventually sell through, albeit at a slower pace than in recent years.

Cost Pressures and Market Realities

The report also pointed out that while the ample volumes of both the 2022 and 2023 vintages offer relief to producers, pricing is influenced by more than just volume or quality. Jasper Morris, cited by Wine-Searcher, highlighted rising costs for grapes and juice, which have increased by about 15% in 2022. This has created a disconnect between winemakers' cost bases and market realities. The challenging market conditions have widened the gap between release prices and what buyers are willing to pay. Considering that the Burgundy market's upward momentum relies significantly on scarcity, which will not be an issue this year or next, prices may need to adjust downward to attract significant demand.

Recalibrating Pricing Strategies

The report echoes Neal Martin's recent reflections on the need for Burgundy's pricing strategy to be recalibrated to align with consumer willingness amid economic challenges. The uncertainties in the market necessitate balancing quality peaks with economic realities.

Secondary Market Trends

On the secondary market, the Burgundy 150 index has fallen 17.4% since its peak in October 2022 and appears "far less buoyant" compared to other equities and commodities. The report emphasizes the importance of considering all classifications of Burgundy, not just the most collectible and less accessible wines, to get a complete market picture. Data showed that while Grands Crus saw a 12% dip in their average trade price year-on-year, the biggest decline, Grands Crus outside the top 150 saw a 7.7% dip. In contrast, Premiers Crus and Village wines saw modest increases, up 10.1% and 9.2% on average in 2023 compared to 2022, although these increases still fell short of the significant gains seen in 2022.

Narrowing Price Gaps

The report noted that the gap between Village wines and Grands Crus is narrowing, raising concerns about the justification of high prices during a market downturn. Compared to peers from Bordeaux First Growths and Super Tuscans, Burgundy's reputation and the rarity of its wines contribute to high price tags. However, justifying these prices becomes increasingly difficult during economic challenges.

In conclusion, while the 2022 Burgundy vintage has provided a welcome boost, the market faces significant challenges. Producers, merchants, and collectors will need to navigate these complexities carefully to maintain stability and growth in the Burgundy market.

Source: The Drinks Business

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